Nov 20, 2022 - Economy

Savings accounts pay more than rock bottom rates for the first time in a decade

Data: FactSet, Bankrate; Chart: Axios Visuals

The Federal Reserve's campaign of interest rate increases has been kryptonite for the stock market this year. But another knock-on effect of rising rates is higher income on risk-free savings accounts — a welcome change for savers.

Why it matters: For the last dozen years or so, rates of return on saving have been quite low by historical standards. Interest on 1-year certificates of deposit were well below 1% most of the time.

Now: Interest rates on savings are surging this year — the average rate on 1-year certificates of deposit has risen from nearly zero to almost 2%, according to Bankrate.

  • Bear in mind, that's just an average. It's fairly easy to find rates online that are upwards of 4%.
  • The impact: Those living on fixed incomes may see their income streams going up.

Yes, but: While 2% is better than nothing, it should still be noted that the "real" interest rate — which factors in the impact of inflation — on most CDs is still negative.

  • How that works: With inflation at 7.7% over the last year, earning 2% on savings means savers are still effectively losing money on the deal.
  • But they're losing less than those keeping their cash under the mattress.
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